OTTAWA (Reuters) – The Bank of Canada (BoC) will not raise rates again and will start cutting a little later than previously anticipated, according to a survey of market participants released by the central bank on Monday.
The BoC’s second-quarter survey, conducted from June 8 to 19, showed a median of the participants expect the bank to hold interest rates at a 22-year high of 5.00% until the end of 2023, before starting to cut rates in March.
In the previous survey released in April, when the BoC’s key policy rate was at 4.50%, median expectation was for a rate cut in January. Money markets still see a chance for another rate hike this year.
A median of 25 participants now also predict a 0.7% gross domestic product growth at the end of 2023, instead of a 0.1% contraction forecast in the last survey.
Earlier this month, the BOC said there was excess demand in the economy as it raised its GDP forecast and extended the timeline for inflation to return to the bank’s 2% target.
The bank has hiked rates 10 times since March 2022 and said it could raise rates further because of the risk of inflation stalling above its 2% target.
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In the survey release on Monday, the median forecast for annual inflation is for 3.0% at the end of this year, compared with 2.7% previously. Expectations for the inflation rate to drop to 2.2% by end-2024 were unchanged.
The central bank expects inflation to remain around 3% over the next year before dropping to its target by mid-2025, six months later than it previously anticipated.
(Reporting by Ismail Shakil and Steve Scherer in Ottawa; Editing by David Ljunggren and Marguerita Choy)